The Pros and Cons of Reverse Mortgages You Should Know About
Home loan / reverse mortgage or transforming assets into cash concept : House model, US dollar notes on a simple balance scale, depicts a homeowner or a borrower turns properties / residence into cash

When considering a reverse mortgage for your retirement planning, it’s important to see both sides of the argument. By understanding both the pros and the cons of choosing a reverse mortgage, you can better understand if it’s the right choice for you and your family.

Reverse Mortgage Pros

  • If you’re over the age of 62, a reverse mortgage is a smart loan option that affords you a more comfortable retirement lifestyle.
  • A reverse mortgage doesn’t impact your ability to live in your home or keep its title. As long as you maintain all of your loan obligations, then a reverse mortgage won’t change the way you live in or own your home.
  • Reverse mortgages are flexible, which means there are options when it comes to receiving your money. Some of the most popular form of reverse mortgage payments are lump sums, regular monthly advances, and a line of credit.
  • In most cases, the money you receive from your reverse mortgage is not considered to be taxable income. (Always talk with your tax professional to be sure.)
  • In most cases, a reverse mortgage won’t change your ability to qualify for benefits from Social Security or Medicare.
  • A reverse mortgage doesn’t make you or your heirs personally liable for any amount of the mortgage if it ends up exceeding the value of your home after the loan has been repaid. Once the loan is repaid, all of the equity that remains is yours (or your heirs’) to keep.
  • As your home’s value increases, so does your reverse mortgage loan’s potential. You can refinance your reverse mortgage to receive more money if your home’s value increases.

Reverse Mortgage Cons

  • The balance of your loan does increase with time because of the accumulation of interest and loan fees.
  • Each time you use the equity of your home, you are leaving your estate and heirs less money and fewer assets. While the home can still be left in your will, the loan balance will have to be repaid. This is typically done by selling the home, but it can also be done with other funds or by having your home refinanced with a traditional mortgage.
  • Depending on where you get your reverse mortgage from, the fees can be higher than they would be with a traditional mortgage.

To decide if a reverse mortgage is right for you, talk to one of our loan professionals today!

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